Wednesday, September 07, 2005

Is the Broken Window a Fallacy?

This is the substance of an email I sent to Walter Williams regarding his Townhall.com piece, Economic lunacy.

I may have gotten up on the wrong side of the bed this morning because I find myself pondering whether or not the Broken Window is really fallacy.

That it is fallacy is beyond question if we are only talking about the physical window.

The argument here is that perhaps there is economic benefit if you consider the relational effects of the "broken window".

Physical objects are a manifestation of a complex web of human relationships. A break in the physical can lead to a break in the relational.

Specifically, in the case of Katrina, it is conceivable that the productivity of the new New Orleans could exceed the productivity of the old New Orleans by a sufficient margin to warrant the added investment occassioned by the tragedy.

The quick counter argument is that, if the investment was warranted, it would have been made anyway.

This counter argument fails to take into account the potential of a disaster to precipitate a significant reordering of the relational dynamics surrounding the physical capital.

In the case of New Orlean, the city of my birth, the relational order was so broken that only a catastrophic event may be able to change it. Katrina has shown a bright light upon the defects of the city that have heretofore been mostly hidden.

While the physical cost of rebuilding is a loss, perhaps the gains of a potential new order in the city will more than offset those costs.

Of course, this is theoretical. I will be much surprised if the new New Orleans does not make the same sort of mistakes as the old, and perhaps many new mistakes as well.

Sunday, September 04, 2005

Never the Same

As a native New Orleanian, I fear that, as mentioned, the city will come look similar, smell similar, sound similar, but yet never be the same.

My immediate family is a rare one that left the city many years ago. At the time, relatives could not fathom how we could move away from the greatest ciy in the world. Indeed, my father could not stay away, he divorced my mother and moved back.

My first love was a beautiful girl in New Orleans. I had one date with her after she had graduated from college and I was professionally established and it was abundantly clear that I would have to move back to New Orleans to continue courting her.

So the tragedy of the refugees is more profound than many may realize. If you live in Dallas, Denver, Atlanta, or similar you are used to people constantly moving around the country seeking opportunity.

New Orleanians of all races and economic status have a bond with the place that is incredibly strong. For many of the refugees, not only is their immediate family displaced, but every extended family member, every friend, and every person of influence is also displaced or perhaps gone.

The devastation of these relationships goes so far beyond any physical damage. Those who now refuse to leave their homes are being rational in their desire to keep all that is near and dear to them- it's so much more than physical possessions.

Saturday, September 03, 2005

Corporate Irresponsibility

New Orleans was built on the same sort of government sanctioned irresponsibility that contributes so much to the present crisis.

Law's venture was chartered by France. Just like modern corporations he and Bienville made decisions in a mode of 'heads we win, tails they lose'.

Goverment granted charters, or incorporations as they are now termed, limit the liability of the individuals involved. Since there is no free lunch, other people pay the price of this grant. Now as then, get rich quick schemes proliferate as a result.

Enron and Katrina are cousins- the end products of business decisions made correctly within the established regime that encourages excess risk taking since others will bear the consequences.

Someone has to pay for destructive business decisions eventually. Limited liabilty typically places that burden on those least able to pay it- like those now suffering and dying in New Orleans.

Friday, September 02, 2005

We will be consoled...

I believe a full life can be consolation to the parent of a terminally ill child and I pray it will still be consolation when our child has passed.

Our 14 year old son was diagnosed with a brain tumor 3 years ago. He was given 6 months to live after the initial surgery. Six months later he was back under the knife to remove a then racketball size tumor that was imminently threatening his life. Then something wonderful happened- the tumor stopped growing. For two years he enjoyed an almost normal life- attending school and enjoying family activites.

Six months ago he developed leptomeningeal disease- a cancer of the brain lining, the meninges. Without divine intervention, he probably has only a few weeks left. He is bedridden and unable to communicate much beyond a groan, a smile, or a nod of the head.

He has taught everyone around him not just how to live but how to suffer. As an 11 year old facing brain surgery the next day, his first words as we walked out of the doctor's office were, 'What a beautiful day'.

He has lived a life where he has known nothing but love because he has given nothing but love. He committed himself to Christ at a young age and, when I suggested that at age 8 that he give ten percent of the first $10 he ever earned to our church, he, on his own, gave the whole $10 in his Children's Church class that day.

He figured out long before I did that living was about loving, and that love is not something you get but something you give.

So he passes through life without most of the elements we consider essential- without divine intervention he will never drive a car, have a girlfriend, own any property, or have children. But he has lived a full life in the most profound spiritual sense- he understands why he is here, what he has done, and where he going. He knows that death is likely soon. He nods approval when we ask him if he is ready to take his place in heaven.

Privately Funded Secure Levees

Levees are more than earthen mounds holding back water- they are the best real estate in town.

Many industries need to be on the water. High end residences are desirable on the water.

So a private solution to this problem is to sell the perimeter of New Orleans to a developer who can then develop the levee real estate, probablly using land leases, in a way that makes sure that each user's leasehold is protected with the positive externality that everything "in the bowl" is then protected. The levees would tend to be very large, because that means more premium real estate- they would extend as far away from the water as the economic benefit of the location would allow.

The users of the premium levee real estate would end up paying very high rents for their premium property. Every levee user has incentive to protect their piece of levee for their own benefit. Everyone else gets the free ride of flood protection.

Station Owners Challenge

I'm wondering if any gas station owners in the gulf area would be willing to do an experiment.

Raise the price to what the market will bear but donate all profits over 'normal' to the Red Cross for hurricane relief.

That way the available gas will go to provide the most benefit possible- both to those who value it highly by purchasing it and those who are in desperate need but not lucky enough to be at a gas pump while gas is being sold at a below market price.

Thursday, September 01, 2005

Flooding No, Anarchy Yes

The anarchy was avoidable, a product of a system that rewards irresponsibility.

By and large, it is the poor and ignorant that are suffering and dying in New Orleans. They got that way by responding correctly to the incentives of our 'Great Society'.

If you have been trained since birth to let the government take care of you, why would you act any more responsibly during this crisis?

The vast majority of the responsible people of New Orleans got out and are living somewhat comfortably with friends and relatives. They will go back and rebuild the great city, using their insurance proceeds and thier considerable human capital.

Geography and meteorology can create difficulties, but only absurd social policies can create a catastrophe of this magnitude.